Rachel J. Roginsky, ISHC - Pinnacle Advisory Group...Economic Outlook Breakfast . September 12, 2018. Rachel J. Roginsky, ISHC. [email protected]. 98 North Washington

Economic Outlook Breakfast September 12, 2018

Rachel J. Roginsky, [email protected]

98 North Washington Street, Suite 403, Boston, MA 02114 ~ 617/722-9916www.pinnacle-advisory.com

The State of the Hospitality Industry in Rhode Island

NATIONAL LODGING MARKET

©Pinnacle Advisory Group

Historic Market Performance - US

Source: STR

$0.00

$30.00

$60.00

$90.00

$120.00

$150.00

45.0%

50.0%

55.0%

60.0%

65.0%

70.0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Occupancy ADR RevPAR

©Pinnacle Advisory Group

RevPAR % Change - US

Source: STR

-6.6%

-1.5% -1.8%

8.0% 8.3% 7.9%

5.6%

-1.5%

-17.0%

5.5%

8.1%6.8%

5.3%

8.0%6.3%

3.1% 3.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

©Pinnacle Advisory Group

YTD Performance Through July 2018 - US

July 2017

July 2018 % Change

Occupancy 66.5% 67.1% 0.8%

ADR $126.70 $130.06 2.6%

RevPAR $84.29 $87.22 3.5%

Source: STR

©Pinnacle Advisory Group

New Supply – July 2018

Source: STR

Properties Rooms % ChangeIn Construction 1,449 190,260 +0.8%Final Planning 1,925 223,774 +2.1%Planning 1,809 194,475 +5.8%

TOTAL PIPELINE

©Pinnacle Advisory Group

Hot Topics - US

Developing/escalating trade war (among other global concerns)

Trump Administration

Short Term Rentals, the fight continues

Inbound Travel

Employment, Wages, Consumer Confidence

Potential/Eventual Weakening

©Pinnacle Advisory Group

Key Takeaways (2018) - US• Despite uncertainties, the cautiously optimistic tone continues (at the time of

creating this slide)• Q1 earnings calls were mostly positive, many companies making upward

adjustments to YE2018 forecasts.• Corporate profits remain strong, combined with record levels of consumer

confidence.• Compression nights continue to decline in top 25 markets year after year since 2014.• Mitigated rate growth despite increasing demand. • Although demand is expected to increase, occupancy growth will be tempered by

new supply in 2018 and 2019. ADR will be the driver of RevPAR, although at adecelerated rate.

©Pinnacle Advisory Group

U. S. Industry Projections

STR PWC CBRE

Occupancy +0.6% +0.2% +0.2%

ADR +2.6% +2.2% +2.4%

RevPAR +3.2% +2.5% +2.7%

STR PWC CBRE

Occupancy +0.2% -0.2% 0.0%

ADR +2.4% +2.2% +2.0%

RevPAR +2.6% +2.0% +2.0%

2018 2019

NEW ENGLAND LODGING MARKET

New England Occupancy 2017

Source: Smith Travel Research

61.6%

66.6%

69.3%

60.8% 61.5%59.8%

40%

45%

50%

55%

60%

65%

70%

75%

80%

Connecticut Rhode Island Massachusetts Vermont New Hampshire Maine

Source: Smith Travel Research/Pinnacle Advisory Group

New England Average Daily Rate - 2017

$116.63

$147.83

$188.31

$144.03

$132.47 $129.42

$60.00

$80.00

$100.00

$120.00

$140.00

$160.00

$180.00

$200.00

Connecticut Rhode Island Massachusetts Vermont New Hampshire Maine

New England RevPAR – 2017

Source: Smith Travel Research/Pinnacle Advisory Group

$71.79

$98.52

$127.03

$87.55$81.44

$77.45

$30.00

$50.00

$70.00

$90.00

$110.00

$130.00

$150.00

Connecticut Rhode Island Massachusetts Vermont New Hampshire Maine

RHODE ISLAND LODGING MARKET

Rhode Island Historical Market Performance 2006-2017

Source: Smith Travel Research

40.0%

45.0%

50.0%

55.0%

60.0%

65.0%

70.0%

$0.00

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

$140.00

$160.00

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017ADR RevPAR Occ

Rhode Island Year-to-Date July 2018

July 2017

July2018

Occupancy 64.8% 65.2%

ADR $142.51 $147.63

RevPAR $92.33 $96.29

REVPAR PERFORMANCE

VARIES:

RI RevPar up 4.3%MA up 1.2%NY up 5.3%

Wash DC down (6.7%)Source: STR

CITY OF PROVIDENCE LODGING MARKET

Providence Historical Market Performance 2006-2017

Source: STR

50.0%

55.0%

60.0%

65.0%

70.0%

75.0%

80.0%

$0.00

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

$140.00

$160.00

$180.00

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

ADR RevPAR Occ

2017 2018Occupancy 71.9% 72.7%

ADR $167.62 $170.27RevPAR $120.51 $123.85

Providence YTD July 2018

Source: STR

RevParUp 2.8%

RevPAR (MSA):Boston 0.2%

Philadelphia 7.1%Washington DC (3.2%)

NYC 4.7%

Providence - Future

Convention

Office Market

Other Demand Factors

New Supply

Projections

Source: The Tap Report – July 2017

Providence Convention Tap Report July 2018

• 2018 Definite Rooms are 87% of the Pace Target.

• YTD July 2018, 5 of the 7 months Definite Rooms exceeded the PaceTarget. However from August through December, Definite Rooms are only69% of Pace Target.

• 2019 Definite Rooms are 86% of the Pace Target.

• For 2019, May, June, and October exceed Pace Targets. The remaining 9months are below Pace Targets. The months with the largest gaps (below75%) include February (54%), July (46%), August (50%), September (72%)and November (58%).

Source: The Providence CVB Report – July 2018

CVB – Other Comments

• Group peak nights continue to lessen, resulting in smaller roomblocks.

• 2020 and 2021 are 94% and 162% to Pace. Long term looks great.• The CVB is seeing an uptick in international attendees.• New hotel inventory will provide more rooms for meeting and

convention attendees.• Booking windows continue to shorten. As a result, the CVB expects

to reach 90-95% of Target for 2018.• There is an uptick in local corporate group demand.• In summary, while slightly off the targeted pace, 2018 and 2019 will

be good for the convention market in Providence.

Source: CBRE

Providence – Downtown Office Market (class A, B, C)

11.2%

14.8% 15.2%

17.2%

18.9%

15.9% 16.0% 16.2%15.6%

16.9%

13.4%

12.0%

0%

4%

8%

12%

16%

20%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Vacancy

Providence Other Factors

Economic Outlook: Modest Growth Anticipated

New Lodging Supply: Woodspring Suites – March 2018;Homewood and RI 2019

Providence – Projections

2018: 72% @ $173: RevPAR-$124.56

2019: 70% @ $171: RevPAR- $119.70

Projections

WARWICK LODGING MARKET

Warwick Historical Market Performance 2006-2017

Source: Smith Travel Research

50.0%

55.0%

60.0%

65.0%

70.0%

75.0%

$40.00

$50.00

$60.00

$70.00

$80.00

$90.00

$100.00

$110.00

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017ADR RevPAR Occ

Warwick YTD July 2018

Source: Smith Travel Research

2017 2018

Occupancy 69.8% 67.1%

ADR $100.92 $107.54

RevPAR $70.44 $72.13

Up 6.6%

Up 2.4%

Warwick – Future

Unemployment: continues to

decline

Airport Factors: YTD Passengers –

Strong Growth

Office Market: 11.3% Vacancy –

Increase over prior year

Industrial Market: 1.7% Vacancy

New Lodging Supply: Hyatt Place Opens June 2018

Other: Providence Market Will

Provide Some Compression

Economy: Continues to

Improve

2018: 67% @ $109.00: RevPAR-$73.03

2019: 69% @ $112: RevPAR- $77.28

Projections

NEWPORT LODGING MARKET

Newport Historical Market Performance 2006-2017

Source: Smith Travel Research

40.0%

45.0%

50.0%

55.0%

60.0%

65.0%

70.0%

$0.00

$50.00

$100.00

$150.00

$200.00

$250.00

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017ADR RevPAR Occ

2017 2018

Occupancy 58.1% 58.6%

ADR $208.34 $226.08

RevPAR $121.07 $132.44

Newport YTD July 2018

Source: Smith Travel Research

Up 8.5%

Up 9.4%

Newport – Future

No new hotels in 2019, but several either UC or in Planning.

International Visitors: - increases at Logan; TF Green: Norwegian Air –93,000 passengers YTD June 2018; 100.000 passengers in 2017.

Group/Meetings Market: Status Quo

Marketing and Programming from Private Sector Remains a Positive

Continued construction of $223.4 M Bridge Work - Newport Bridge, Mt Hope Bridge and Jamestown Bridge

Higher Gas Prices: Mixed Results

2018: 63% @ $235: RevPAR-$148.05

2019: 63% @ $244: RevPAR- $153.97

Projections

New Supply

MIDDLETOWN LODGING MARKET

Middletown Historical Market Performance 2011-2017

Source: Smith Travel Research

40.0%

45.0%

50.0%

55.0%

60.0%

65.0%

70.0%

$10.00

$30.00

$50.00

$70.00

$90.00

$110.00

$130.00

$150.00

2011 2012 2013 2014 2015 2016 2017

ADR RevPAR Occ

2017 2018

Occupancy 52.0% 51.8%

ADR $119.55 $126.24

RevPAR $61.99 $65.39

Middletown YTD July 2018

Source: Smith Travel Research

Up 5.6%

Up 5.2%

Middletown – Future

New Supply

146 Room Cambria(June 2017)

37 Room East Island Reserve (June 2017)

200 Room Expansion - Navy Gateway Inn

and Suites (November 2018)

Remains a Price Alternative for Newport Visitor

Navy Base – Expect to See Moderate Growth

Newport Grand Casino closed in Aug. Future Use Uncertain – Tiverton Casino and hotel opened/ 2018: 58% @ $150: RevPAR-$87

2019: 59% @ $154.50: RevPAR- $91.15

Projections

New Supply

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